26 September 2012
The resort to compounding is made only in circumstances where a dealer is left with no option but to surrender and agree that he committed the offence alleged by the Dept. But before doing that you will have to see the facts as well as the law governing your matter and see whether in fact a compounding is warranted. I have seen many cases where dealers compounded merely on the basis of pressure or threat from the department. Please note that once compounding is done you get immunity from prosecution and an assessment will follow adding 2 times and above of the turnover alleged to have suppressed. The compounding fee may be accounted as such in the accounts but you cannot claim it as expenditure as it is connected with infraction of law. The rate applicable is twice the tax applicable to the commodity which is involved in the suppression. Hope u r clear now. Take care before going ahead. ok?